ALEX BRUMMER: Halting a bonus bandwagon at the banking giants

There are now so many probes going on at Barclays it is hard to know where to begin. The bank may have avoided the pitfall of a merger with ABN Amro and a bailout from the Government, but the cost in terms of reputation and repair work is immense.

The tendency is to blame Bob Diamond for this mess and certainly some of the scheming, most notably Libor, came on his watch.

The remarkable thing, however, is how little of the dirt has stuck to the patrician John Varley, who was chief executive through the depth of the financial crisis.

Weathering the storm: The tendency is to blame former Barclays boss Bob Diamond for the mess the bank is in

The latest disclosure – that Barclays may have been party to a Guinness-style share support operation, when it was partly rescued by Qatar Holdings – is shocking. Potentially, lending a third party money to buy your own shares is outlawed.

But it is possible that as Qatar’s bankers Barclays might have provided some kind of bridging finance necessary until the Gulf statelet could lay hands on the cash. Barclays has an awkward history of making loans designed to improve its financial appearance.

The best example of this occurred in 2009 when the bank parked £7bn of toxic assets offshore in the Cayman Islands into a fund managed by former Barclays’ staff and financed by loans from Barclays.

The vehicle Protium helped to clean up the balance sheet but also led to investors eventually taking a hit.

Given this cocktail of mistakes it is only right that the new chief executive Antony Jenkins, who is seeking to develop a more sober agenda for the bank, is leading by example by forgoing any bonus for the next financial year.

Barclays and Royal Bank of Scotland, which faces a £500m Libor fine shortly, could do worse than listen to the advice of former Chancellor, Lord Lawson. The Tory grandee (a former Barclays board member) sees no reason in the world why RBS, still largely state controlled, should be paying any bonuses at all in 2013.

Indeed, if RBS and Barclays were listening to their new regulator Sir Mervyn King, governor of the Bank of England, they would be conserving capital rather than distributing it.

There would be a great deal of squealing from the banks on why the suspension of bonuses would leave the City at a disadvantage and send the best bankers and traders scuttling off elsewhere.

But after a year when many thousands of adventurous bankers and traders have been thrown onto the market as banks such as UBS and Deutsche Bank have slimmed down, the available talent pool is awash with ripe skills.

Bonuses, if there are any, should be for exceptional work not for banks that bent the rules.

Cult of equity

The daily trope of stock market reporting has been reinvigorated this week.

Five years after the great panic share prices have come back into their own. Some £100bn in value has been added to the FTSE 100 since this year and American stocks have bounced too.

Why the interest in equities? The technical explanation is that fund managers have had their fill of risk free, low interest fixed rate assets and are looking for racier returns.

The FTSE, yielding on average 3.5 per cent, provides that with promise of enhanced capital value.

The economists’ interpretation is that the share markets are a good forward indicator. They tell us where the economy is going to be in the next 6-18 months. Latest data in the shape of UK manufacturing and American jobless numbers look particularly rosy.

Collective savings such as pension funds should look more healthy and increased confidence, generated by rising share prices, ought to support future growth. As importantly it may bring the initial public offering market back to life.

Among the companies on the slipway are insurance group eSure, some of the discarded bank assets (if there is no trade sale) and potentially the Royal Mail.

Bring it on.

Speeding up

Far from being a dull old utility, BT is becoming a really effective challenger in the digital space. The group has edged past Virgin to become the biggest provider of fibre broadband and is revving-up speeds in town and country.

It is also to offer a serious challenge to BSkyB with the elevation of the BT Vision sports channel that will feature Clare Balding, heroine among the Olympic commentators, as well as Premier League football and rugby.

All this is terrific for its army of small investors (including this writer) who have stayed loyal since privatisation.

One question though. How long will it be before the millions of landline users across the nation start to question whether the quarterly fees spent on telephone rentals is money well spent?